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Bank of the Year AwardsNovember 29 2013

Bank of the Year Awards 2013 – Middle East

The Bank of the Year winners from the Middle East.
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Bank of the Year Awards 2013 – Middle East

Bahrain: Ahli United Bank

Ahli United Bank (AUB) recorded strong growth in 2012, achieving an 8.1% increase in net profit to $335.7m and a 5.5% increase in assets to $29.9bn, while also managing its costs effectively, with its cost-to-income ratio falling from 32.4% to 29.9%.

While growing its assets, AUB has been careful to maintain their quality through prudent risk management – increasing its total provision coverage ratio from 135% in 2011 to 150% in 2012 – and helping it to secure a higher credit rating than the Bahrain sovereign.

2012 marked a year of important technological improvements for AUB as it undertook a number of initiatives to enhance its e-banking platform. These include the launch of self-service kiosks, the implementation of new security features for online internet banking transactions and the launch of three-dimensional secure services for credit cards in association with Visa and MasterCard.

Such improvements have helped boost AUB’s online business: the number of retail internet banking customers grew by 25% during 2012, while the growth in corporate internet banking customers was even higher at just under 50%. This translated to a sizeable 50% increase in monthly internet banking transactions.

During 2012, AUB also launched a point-of-sale product in Bahrain with state-of-the-art systems and terminals, resulting in a successful acquisition of around 1100 merchants in the first few months of POS launch. The bank also launched its business-to-business platform for corporate customers.

“AUB plans to focus further on cross-border trade finance initiatives and the rollout of its business-to-business platform for corporate customers which provides a very efficient one-stop solution for cash management, including payments, collections and reconciliations,” says Adel El-Labban, group chief executive officer and managing director of Ahli United Bank. “In line with its strategy, AUB will continue to seek attractive opportunities to develop its banking franchise in the region.”  

Despite the continued political upheaval across much of the Middle East and north Africa region, AUB Group’s five subsidiaries – Kuwait, Oman, Egypt, Iraq and Libya – all generated profit increases in 2012 and it grew its presence in many of these markets. During 2012, Ahli Bank Oman (ABO) increased its capital through a $64.9m rights issue, thereby raising its paid-up capital to $312.6m. 

Iran: Bank Pasargad

Once again, Bank Pasargad stood out as the clear winner in the Iran country category this year, marking the second consecutive year that it has won this award.

Pasargad defied the considerable economic slowdown in Iran (gross domestic product grew at 0.36% in 2012), caused by intensified international sanctions imposed on the country, recording a 34% increase in total assets from IR221,808bn ($8.93bn) in 2011 to IR296,289bn in 2012 and a sizeable 39% increase in net profits from IR9836bn to IR13,719bn.

Its Tier 1 capital grew by 17.8% from IR41,213bn in 2011 to IR48,582bn in 2012, and at 21.44%, it boasts the highest capital adequacy ratio among all Iranian banks.

A sizeable part of this growth has been generated by foreign exchange gains, which increased by 183% from IR517bn in 2011 to IR1464bn in 2012 while income on fees and commissions rose by 96% in the same period, from IR2336bn to IR 4587bn. 

However, the bank has also made a big push on the technology front, in recognition of the fact that electronic banking is developing rapidly in Iran.

Conscious of the country’s internet connectivity problems, it introduced a mobile banking app for Android and Java users that can be accessed through SMS infrastructure rather than relying on an internet connection. The app had attracted more than 100,000 subscribers by the end of 2012.

It also recently introduced the MPAAD system – a payment system enabling all cardholders to buy goods and services simply by sending text messages. The system already handles more than 300,000 transactions daily – making the bank a major payment system provider in Iran.

Pasargad also launched a new channel that directly connects customers’ accounting systems to its core banking system, thereby providing an online accounting system for its customers. It also introduced a five-year deposit account where no penalty is issued to the holder in cases of withdrawal prior to the maturity date. This has resulted in a 1% increase in its market share in deposits among local private banks. 

“Given that Iran’s new government is moving ahead with economic reforms and considering taking steps to ease international sanctions, there is growing potential for banks to utilise their strengths and expand their domestic and international network,” says Dr Majid Ghassemi, vice-chairman and managing director of Bank Pasargad.

Israel: Mizrahi Tefahot Bank

Israel’s Mizrahi Tefahot Bank boasted some notably impressive financials in 2012, ranking as the fastest growing bank among the five largest Israeli banks during 2012 as measured by both assets and loan growth.

Total assets grew by 8% from NIS150bn ($42.58bn) in 2011 to NIS162bn while loans increased by 7.8% from NIS119bn to NIS129bn. The bank also recorded a considerable 15.58% growth in Tier 1 capital to NIS9bn and a 3.07% increase in net profits to NIS1.07bn. It also achieved a return on equity of 13.1% – a considerably higher ratio than the four other largest banks, whose return on equity ranged from 3.8% to 10.1%.

While expanding its balance sheet, Mizrahi Tefahot kept a disciplined control of its expenses – proving itself to be the most efficient bank in Israel with a cost-to-income ratio of 58% in 2012, a considerably lower ratio than the four other largest banks, whose cost-to-income ratios ranged between 65% and 74%.

Mizrahi has been focusing on retail banking at a time when corporate banking opportunities have been sluggish in Israel. More than 70% of its balance sheet is comprised of household assets and it is the largest mortgage provider in Israel, with a market share comprising more than one-third of the domestic market. 

During 2012, the bank continued the development of its virtual banking initiatives, such as its Hybrid Banking service, which seeks to integrate the best supportive digital technology with a dedicated account officer providing personal service.

Mizrahi also continued to strengthen its innovative Live banking proposition, which provides 100% virtual banking to targeted segments, through the opening of two new Live branches, including one focusing specifically on university students.

“We intend to further cement our position as Israel’s fastest growing, most innovative bank by strengthening our unique digital channel strategy, bringing clients closer to our branches rather than distancing them from us, and penetrating client segments not yet explored. In addition, we will increase our presence in the corporate universe,” says Eldad Fresher, president and chief executive of Mizrahi Tefahot Bank. 

Jordan: Housing Bank for Trade & Finance

Jordan’s Housing Bank for Trade & Finance (HBTF) recorded a notably strong performance in 2012, posting growth across all the key financial indicators, with net profits growing by 4.5% to $147m while assets rose by 2.2% to $10bn.

“During 2012, we increased growth in our business and operations. Profits were the highest in five years, with total assets and credit portfolio achieving good growth,” says Michel Marto, chairman of HBTF. 

The bank successfully launched new products, improved its delivery channels and maintained its leadership position by continuing to operate the largest branch (117) and ATM (194) networks in Jordan.

It also strengthened its competitive position in the banking sector by developing a range of banking products and services for various segments. Most noticeably, it launched new products geared towards small businesses, such as a new business loan and its ‘business vehicle’ product. A number of consumer products were also enhanced and re-launched, such as automobile financing, purchase instalments and credit/charge cards.

At the commercial and corporate banking levels, HBTF also leveraged its agreements with the Overseas Private Investment Corporation and the Jordan Loan Guarantee Corp to finance small and medium-sized enterprises (SMEs).

It also became the first Jordanian bank to join the European Bank for Reconstruction and Development’s (EBRD’s) Trade Facilitation Programme (TFP) as a confirming bank. Through the TFP, the EBRD provides guarantees to international confirming banks and short-term loans to selected banks and factoring companies for lending to local exporters, importers and distributors. 

Therefore, the TFP is aimed at promoting foreign trade to, from and among the EBRD’s countries of operation and HBTF’s membership is expected to help improve levels of international trade by Jordanian companies.

HBTF was also chosen by the Jordanian government as the sole bank to help it distribute cash subsidies to 500,000 eligible families in 2012 and 2013. HBTF’s branches paid out the cash subsidies through an extensive after-hours programme that it successfully completed within 30 days on both occasions.   

“The bank confronted a number of challenges in 2012, mainly the turmoil in the immediate region and its impact on banking operations, and the continuous strong competition in the home market,” says Mr Marto.

Kuwait: National Bank of Kuwait

National Bank of Kuwait’s (NBK’s) strategy has always focused on income diversification and 2012 was no different as the bank rolled out new initiatives and enhanced and refined its presence in existing sectors.

This strategy paid off, with the bank growing its assets by 21% to $58.6bn and its Tier 1 capital by 6% to $5.9bn, while profitability remained strong in 2012, with a return on assets of 2% and a return on average equity of 13.4%. NBK’s capitalisation ratio stood among the highest in the Middle East with a capital adequacy ratio of 17%. 

NBK continued to maintain its leadership position in Kuwait’s retail banking market with a 40% share of the market. Meanwhile, in light of the fairly stagnant domestic corporate banking market due to the slow pace in government spending and project execution, NBK shifted its focus to growing its presence in the mid-corporate segment.   

However, arguably the highlight of NBK’s performance has been its highly successful acquisition and transformation of its Islamic subsidiary, Boubyan Bank, which grew its market share from 3.5% in 2011 to more than 4% in 2012.

During 2012, Boubyan launched more than 10 new products and services, including many innovative ones such as its 0% health finance programme, which enables customers to finance their health service needs. All major hospitals and clinics in Kuwait are now participating in this scheme.

Boubyan also launched a cardless cash withdrawal service and a dedicated banking section catering only to women, as well as specialised programmes for children.        

“We are making strong progress in Islamic banking in Kuwait through our subsidiary Boubyan Bank, which has been aggressively growing its market share in that segment,” says Ibrahim Dabdoub, group chief executive officer of National Bank of Kuwait. 

NBK has a strong presence today across 16 countries and is aggressively leveraging on Boubyan’s success to offer Islamic transactions in its international markets.

The bank also continued to focus on expanding its business in the Gulf Co-operation Council (GCC) region, which has recorded growth in excess of 40% since the start of 2011.  “Recently, with more focus on GCC markets, we have managed to strengthen our market positioning, thereby leveraging NBK’s strong franchise in the region,” says Mr Dabdoub.  “The operating environment in Kuwait has recently seen some progress which led us to improve our outlook.”

Lebanon: Blom Bank

This is the third consecutive year that Blom Bank has won our Bank of the Year award in Lebanon – a testament to the bank’s unrivalled development across several fronts. During 2012, Blom grew its assets by 8% to $25bn, its Tier 1 capital by 10.1% to $2.17bn and its net profits by 1.2% to $335.4m.

It enlarged its small and medium-sized enterprise presence, increasing loans to this segment by $100m during 2012. It also lead managed a syndicated loan used to finance the development of Lebanon’s largest mall by MAF Holdings, the leading shopping mall developer across the Middle East and north Africa (Mena) region.

In the asset management space, Blom launched a discretionary portfolio management service for which it has already won nine mandates worth a total of $12.5m. The bank also successfully launched a new mutual fund, the BlomInvest Mena fund, which is focused on the Mena region and looks for a balance between equities and fixed income. Furthermore, its Saudi Arabian subsidiary BlomInvest Saudi Arabia, launched two funds in 2013 worth SR850m ($226.65m).

In late 2012, the bank was selected by the country’s government as the sole provider of loans to Lebanese students for the purchase of the new tablets that will replace textbooks in both public and private schools.

In May 2013, Blom teamed up with mobile operator Touch to launch the Touch pre-paid Visa credit card, which offers free minutes of talk time based on spending. It is the first such card in the world.

All of this has been achieved in an intensely difficult operating environment given the regional political and economic instability characterised by ongoing revolutions in Syria and Egypt, potential deterioration in Jordan and a slowdown in Lebanon’s domestic economy. Blom’s ability to deliver consistent growth in a turbulent market is evident by the fact that its total operating income before expenses grew by 11.9% in the first half of 2013, compared with the same period in 2012.

“The past year has been rich in challenges, mainly stemming from political uncertainly in the Middle East. We addressed these challenges by maintaining our conservative policies, keeping a lid on costs and focusing on our core Lebanese market and our operations in the Gulf. Our cost-to-income ratio remained below 40% and our return on equity remained steady at about 17%,” says Saad Azhari, chairman and general manager of Blom Bank.

Oman: Ahli Bank

Established as a commercial bank in January 2008, Ahli Bank Oman has made great strides in its development over the past six years and its 2012 key financial indicators bear testimony to a strategy that is continuing to yield impressive results.

The bank grew its assets by 18.2% to OR1.1bn ($2.86bn), its Tier 1 capital by 36.2% to OR153.8m and its net profits by 19.3% to OR21.7m. This healthy growth instilled significant confidence in its shareholders which resulted in an oversubscription to the bank’s $64.9m rights issue in August 2012. 

The capital increase, which raised its paid-up capital to $312.6m, played a key role in laying the foundations for Ahli’s Islamic banking division – Al Hilal Islamic Banking – which was established in January 2013 and today operates six branches, giving it the largest such branch network in Oman.

In June 2012, the bank acquired a small brokerage firm and introduced brokerage and margin trading services to its retail, corporate and high-net-worth clients. This has now been expanded into other areas of investment banking with the establishment of an asset management division.

In July 2013, the newly established asset management division launched its first Islamic fund – the Al Hilal Mena Fund – making Ahli the first Omani bank to roll out an Islamic fund and marking the first Omani fund to be focused on the Middle East and north Africa region. The bank is now ready to offer portfolio management services.

In rolling out these new services, Ahli has been leveraging on its strategic partnership with Bahraini-headquartered Ahli United Bank Group which is the largest shareholder in ABO, and with whom it has a technical and management services agreement. 

“Along with our strategic partner Ahli United Bank, our commercial banking team is fully geared towards capitalising on the opportunities arising from the new projects announced by the government, and we have a clear agenda to focus on building our customer base in the small and medium-sized enterprises sector in accordance with the importance placed on building this pivotal category in the sultanate’s economy,” says Abdulaziz Mohammed Al Balushi, chief executive of Ahli Bank Oman.

Ahli has also set itself a series of growth targets to be implemented by 2016: it plans to increase its branch network from 18 to 30, expand its customer base to 40,000 from the current 26,000, and increase its return on average equity to 20% from 15.1%.

Palestine: Bank of Palestine

Bank of Palestine (BOP) had a highly successful year of growth in 2012, which is reflected in its numbers: it grew its assets by a tremendous 21% to $2bn, its Tier 1 capital by 13.33% to $181.3m and its net profits by 12.85% to $38.3m.

This growth has been fuelled by a range of initiatives across the bank. In the retail space, BOP has worked hard to introduce new products that cater to the under-banked segments of society.

Although a challenging segment for banks to lend to, BOP has placed a lot of emphasis on investing in micro, small and medium-sized enterprises, which represent about 90% of Palestinian businesses, and in 2012, launched a special soft loan for entrepreneurs called the ‘Innovation Loan’. Meanwhile, in light of the fact that 70% of Palestinians are under the age of 29 and unemployment among youth stands at about 35%, BOP has been developing banking products tailored to meet their needs, while also developing a banking programme for women to empower them to start their own businesses.

In 2010, BOP launched its Green Loans programme to help finance solar panels, wastewater treatment systems and rain water harvesting projects. In 2012, the bank further developed the programme to allow all client segments, including households, farmers and small and medium-sized enterprises (SMEs) to benefit from this soft loan to become more self-sufficient.  

Several initiatives were also undertaken to promote the cards business in the country in an effort to transition clients from cash to cards. The bank introduced a prepaid Visa cash card which has proven to be very popular among younger customers.

In 2012, BOP also launched the services of PalPay. Building on the bank’s point-of-sale (POS) networks, PalPay enables bank and non-bank clients to pay bills and top up mobile phone credit using the bank’s 5000 POS merchant terminals spread throughout the country. More than 5 million transactions have been made through PalPay since its launch.

Over the past six years, BOP has doubled its branch network to 48 branches and is planning to double them again over the next six-year period.

Looking forward, BOP regards the sparsely populated branch network across Palestine – out of a total of 232 branches, each branch serves about 16,800 residents – as an opportunity both to extend the reach of its business and to provide high-quality, innovative products and advisory services.

Qatar: Doha Bank

Doha Bank boasted the launch of a raft of innovative new products and services in Qatar during 2012 that helped it maintain an edge in the domestic market and also fuelled growth: the bank’s assets grew by 4.7% to $15.2bn, its profits by 5.1% to $358.4m and its Tier 1 capital by 6.1% to $1.5bn.

In light of the high demand for gold, the bank launched several initiatives aimed at enabling its customers to invest in the commodity. In June 2012, Doha Bank launched its bullion initiative that enables customers to buy physical gold over the counter from all branches. It also launched a gold investment loan product and a loan against pre-owned gold packages – the first of its kind in Qatar. 

Doha Bank also launched the first ever co-branded shopping credit card in partnership with Lulu hypermarkets, one of the biggest retail chains in the Gulf Co-operation Council, as well as a pre-paid travel card in partnership with two tour operators, which is available in three major currencies.

Doha Bank also further augmented its international remittance network by forming alliances with the Philippines’ United Coconut Planters Bank, Sri Lanka’s Commercial Bank of Ceylon, Turkey’s Akbank and Bangladesh’s National Bank Limited. In addition, it launched a partnership with China Union Pay, the biggest and most advanced bankcard association in the Chinese card industry. 

In October 2012, Doha Bank entered into an agreement with India Bulls Group to offer mortgage loans to non-resident Indian customers for acquiring property in India. Meanwhile, in line with its international expansion strategy, it inaugurated representative offices in Australia, Hong Kong, the United Arab Emirates and Canada.

“We also continue to improve our fee and commission income as we accelerate our loan volumes. Our wholesale banking unit is building partnerships with experts in the construction and infrastructure space and we expect to see new opportunities for lending in the contract financing, real estate and government sectors,” says Raghavan Seetharaman, chief executive of Doha Bank.  

“Small and medium-sized enterprises are also a segment that will provide us with significant opportunities. The UAE and Qatar exchanges have been upgraded from frontier to emerging market status (by index provider MSCI) from 2014 and hence we will look for opportunities in the investment segment as well.”

Saudi Arabia: SABB

The Saudi British Bank (SABB) has had an impressive year on all fronts: Tier 1 capital grew by 15.8% to SR19.8m ($5.28bn), a 13% growth in assets to SR156.7m and a 12.2% growth in net profits to SR3.2m.  

The bank worked hard during 2012 to implement a raft of new initiatives that provided it with significant success and competitive advantage.

After becoming the first Saudi bank to launch a renminbi proposition, in 2012 it became the first bank to conduct a renminbi trade-related transaction in the country. SABB was also the first, and so far, the only bank in Saudi Arabia to launch a China desk, to serve as the first point of contact for the banking needs of Chinese companies entering the country. This has given it an enormous first-mover advantage – the bank’s business with Chinese companies grew by more than 80% in 2012.

Following on from its successful launch of its Instant debit card issuance product in 2011, SABB successfully launched an Instant credit card issuance product at selected branches, which is now being rolled out across all branches. The bank also launched an online account opening service in 2012 and established a virtual relationship management team for its priority customers.     

SABB also launched a number of new payments and cash management products, including but not limited to virtual accounts and payment cards. The virtual accounts provide customers with the ability to identify the remitter/originator of inward payments posted into their bank account. Meanwhile, the payment cards allow employers to electronically deposit or credit salaries into the payment card account of low-salaried employees at every salary cycle.

In November 2012, the bank launched an innovative new foreign currency e-platform to distribute foreign exchange and money market prices to customers. This platform is similar to an internet banking platform, whereby customers can place and execute orders without calling the dealing room.

“Opportunities abound in Saudi Arabia and it is an exciting time,” says David Dew, group general manager and managing director of SABB. “Both corporate and retail markets are growing rapidly and SABB continues to mobilise our resources in businesses where we believe we can add real value to our customers – such as trade, payments and cash management and treasury – connecting Saudi Arabia and our customers to the global economy.”

United Arab Emirates: First Gulf Bank

First Gulf Bank (FGB) had an exceptionally strong year in 2012, recording a 12% increase in profitability to Dh4.2bn ($1.14bn), an 11% growth in its assets to Dh175bn and a 7% rise in its Tier 1 capital to Dh26.9bn.

With 23 national banks and 28 foreign lenders, the United Arab Emirates’ banking sector is a highly competitive market and competition is intensifying. This makes the need for innovation all the more important.

As part of its drive to ensure continued innovation across its portfolio of products, First Gulf Bank formed a partnership with Life Insurance Corporation (LIC) in January 2013 to develop insurance and retirement plans aimed specifically at, but not exclusive to, non-resident Indian customers in the UAE.

The first of these was the Jeevan Aastha 3, a single premium plan with a fixed term of three years, offering competitive fixed returns of about 4% annually on the invested premium. Over the first 30 days following the launch of this product, FGB achieved record sales of premiums worth Dh272m, demonstrating both the understanding of the necessity of financial planning among the UAE expatriate community and their desire for financial products designed to meet their individual needs.

Aside from its partnership with LIC, FGB has also created a series of products and services under its First Insure umbrella, including a series of products addressing prominent health issues. Launched in November 2012, its Diabetes Care Plan was created to address the financial needs of the rising number of diabetics in the UAE – an estimated 20% of the population is currently affected by the disease.

In August 2012, FGB launched its Well Woman Plan, which provides cover to UAE-based female cancer sufferers (cancer is the third most common cause of death in the country). Starting with a premium of Dh50 per month, plan holders are guaranteed an upfront cash payment up to Dh200,000 if they are ever diagnosed with cancer. 

In June 2013, FGB signed an agreement to acquire Dubai First, a consumer financial services business with a strong market share in cards, for Dh601m. 

Today, FGB’s fundamentals are stronger than ever – the bank generated a net profit of Dh2.21bn during the first half of 2013, a 13% increase over the first half of 2012. This positions FGB as the second most profitable bank in the UAE, closely behind National Bank of Abu Dhabi, despite only having half its asset base. 

Yemen: Yemen Commercial Bank

In spite of the prevailing political and economic instability within the country and the surrounding region, Yemen Commercial Bank (YCB) achieved noticeably impressive growth during 2012. The bank increased its assets by 33% to YR106.2bn ($493.78m), its Tier 1 capital by 10.5% to YR9.03bn and its net profits by 6.7% to YR859.9m. YCB also successfully grew its deposits by 37.1% from YR69.2bn at the end of 2011 to YR94.9bn on the back of a 71.3% increase in Yemeni riyals and a 62.2% increase in US dollars.

In light of the difficult operating environment, YCB has seen a sizable reduction in credit demand and therefore decided to focus its efforts on generating new revenues through growing its trade finance business, specifically letters of credit.

Additionally, YCB has played an important role in advancing electronic banking services in Yemen. It is a principal member of MasterCard, an associate member of Visa and it recently became compatible with the new Swift system programmes.

It also continued to implement its high-quality protection programmes, such as its Anti-Money Laundering and Office of Foreign Assets Control systems.

To tighten risk management further and adhere with rules imposed by the Foreign Account Tax Compliance Act, or Fatca, the bank is implementing a comprehensive training programme to enhance the compliance team’s skills. It also continued to invest in treasury bills – investing YR61.3bn in treasury bills and certificates of deposit against an interest rate average of 21.25% per year.

The bank has worked hard over the past year to strengthen its liquidity position, with its capital adequacy ratio (CAR) increasing to 30.79%, more than triple the CAR minimum requirement of 8% set by the Central Bank of Yemen and the Basel III committee.

Established in 1993, YCB has served as the main source of funding for aiding the various construction projects under way in Yemen. It has supplied more than 12 infrastructure projects with total funds of YR20bn, the last of which was financing the Shakra-Mukalla Road Project, in addition to the Ibb Tourist Park at a cost of YR2bn.

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